Left Home Without It

Earlier this week, American Express received approval from the Federal Reserve to become a bank holding company, which is a similar structure to traditional commercial banks. The credit card company now has access to financing from the Fed and the ability to grow a large deposit base.

The increased funding opportunities through government programs, including the potential $3.5 billion investment, could be a huge boost to American Express as one of its primary sources of funding has nearly disappeared amid the ongoing credit risis.

Before the feds lend American Express $3.5 billion, I have a few conditions I would like to see placed on any loan backed by my tax dollars:

1. Make sure the loan agreement is several pages long in 6pt type written in legalize so complicated even the lawyers who wrote it don’t understand what its saying.

2. Start AMEX with a low, low, introductory rate like 3.99%, then, after a few months, jack it up to 17-22% which also suddenly makes their monthly payments back to the federal government shoot through the roof.

3. In addition to the interest, charge them a large annual fee for the privilege of being a customer of the federal government.

4. Send them every month offers to buy official treasury products monogrammed with A-M-E-X that they don’t want or need and require them to reply only if they are NOT interested in the offer.

5. When they call the treasury for servicing on their $3.5 billion credit limit, reroute the call to a call center in Bangladesh.

6. Make them press “1” for English.

American Express has gotten into their financial situation for a similar reason the banks, insurance and finance companies are in trouble. Like Freddie Mac and Fannie Mae did packaging and selling mortgage securities, AMEX packaged credit card debit and sold it to investors in the securitization market.

Now investors have no interest in buying credit card debt.

The question I want to know is if AMEX is able to get a $3.5 billion loan of American tax dollars, does that mean I still have to pay my AMEX bill? After all, AMEX will owe a lot more to me as a taxpayer than I owe to them as a customer.